The Tom Petters criminal and civil investigation has been very good for the Twin Cities legal industry.

A second round of attorneys' fees presented to U.S. District Judge Ann Montgomery Monday totaled nearly $1.6 million for the months of December and January.

That's on top of a $1 million tab filed in mid-December covering the months of October and November. Seventeen law firms filed claims, three of which exceeded $300,000 each.

The Minneapolis firm Kelley & Wolter, whose Doug Kelly is the court-appointed receiver for Petters Group Worldwide and Petters Company Inc., submitted the largest bill at $368,428, which covered three months of activity.

The criminal defense team for Petters billed $332,910 for helping him prepare for his scheduled trial in June. Petters, 51, of Wayzata, is charged with conspiracy, fraud and money laundering in what authorities have described as a $3.5 billion Ponzi scheme. Petters maintains he is innocent, although several associates have pleaded guilty to related charges.

Lindquist & Vennum, the Minneapolis firm handling the bankruptcy proceedings for the Petters organization and helping Kelley to catalog assets that can be later used to partially repay creditors, submitted a bill for $312,000.

Federal prosecutors asked Montgomery on Monday to delay approval of the legal fees for three weeks after the government raised questions about the Petters "directors and officers" insurance policy being used to reimburse the fees. "There are a lot of different fees here," said Assistant U.S. Attorney Gregory Brooker. Montgomery agreed to the delay and said she'd rule on the motion to pay the fees later.

"I'm trying to keep the fees down but I can't control all of them," Kelley said after the hearing. "Those fees in a major fraud investigation are not outrageous."

The fee application under discussion Monday included legal bills for several Petters employees who have been interviewed by investigators or who have testified before a grand jury but are not targets of the investigation.

Kelley said those employees, who include Polaroid Chief Executive and former Petters Group Worldwide President Mary Jefferies, are entitled to attorney's fees because they have some knowledge of the operation in light of their job duties. They are indemnified, Kelley said.

The other receiver in the case, Gary Hansen, who is responsible for the estate of Petters' associate Frank Vennes, Jr., filed a claim of $129,102 for his Minneapolis law firm, Oppenheimer Wolff & Donnelly. Hansen also requested $129,102 for Vennes' defense attorney, James Volling of the Minneapolis law firm Faegre & Benson, although Vennes has not been charged in the case.

On a separate Petters-related issue, Montgomery approved paying the monthly health insurance premiums of Petters codefendant Larry Reynolds, who awaits sentencing on charges of fraud and money laundering. His personal finances are in receivership under Kelley's control.

Montgomery denied Reynolds' request for a host of other payments, including satellite TV bills at his two homes, health club fees, more money for his meals, eye and dental care, rent and utilities for an office, and old bills.

"Receivership funds will not be used to maintain the status quo lifestyle to which Reynolds may have been accustomed at others' expense," Montgomery wrote in a five-page order Monday.

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